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(ET) Objection Deadline: July 19, 2021 at 4:00 Pm 19-23649-rdd Doc 3276 Filed 07/19/21 Entered 07/19/21 15:56:26 Main Document Pg 1 of 40 Hearing Date: August 9, 2021 at 10:00 a.m. (ET) Objection Deadline: July 19, 2021 at 4:00 p.m. (ET) KLEINBERG KAPLAN WOLFF & COHEN, P.C. Matthew J. Gold 500 Fifth Avenue New York, New York 10110 212-986-6000 Counsel to the States of Washington and Oregon UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: ) Chapter 11 ) PURDUE PHARMA, L.P., et al., ) Case No. 19-23649 (RDD) ) Debtors. ) (Jointly Administered) ) ) OBJECTION OF THE STATE OF WASHINGTON, THE STATE OF OREGON, AND THE OBJECTING STATES TO CONFIRMATION OF THE DEBTORS’ PLAN OF REORGANIZATION To the Honorable Robert D. Drain, United States Bankruptcy Judge: For its objection to the Debtors’ Sixth Amended Plan, Docket #3185, the State of Washington (“Washington” or the “State”), the State of Oregon (“Oregon”) and the Objecting States joining on the appendix hereto (the “Objecting States”) respectfully state as follows: INTRODUCTION 1. Opioid abuse is the worst manmade epidemic in history. Over 290,000 people have died from opioids in our country since 2015. In Washington, three die every day on average.1 And the epidemic is worsening. Last year, more than 69,000 people died nationwide from opioids – a record number according to new data released by the Centers for Disease Control and Prevention 1 Fifty-eight Oregonians died from opioid related causes in 2000. By 2015, that number had more than quadrupled. 19-23649-rdd Doc 3276 Filed 07/19/21 Entered 07/19/21 15:56:26 Main Document Pg 2 of 40 that reflects a rise of nearly 30% from 2019. Deaths in 2020 from opioids nearly eclipsed the total number of fatal overdoses in the previous year. Ten States are predicted to have at least a 40% rise in drug overdose deaths from the previous 12-month span, according to the CDC. With all due respect, the Attorneys General must be free to pursue accountability for the Sacklers and this Court should not interfere. 2. Purdue aggressively marketed what was essentially an uncontrolled experiment on the American public, as there was, and is, no reliable evidence that opioids are effective at relieving chronic pain in the long term. Purdue cloaked the sale of its products in the legitimacy of medicine. Unlike tobacco or alcohol, about which no medical claims were made, patients were told by health care providers that opioids are a powerful medicine, safe to use as prescribed, and effective to relieve chronic pain. Patients quickly became dependent on opioids and, once hooked, susceptible to a host of foreseeable adverse events including addiction and death. Purdue knew of, and profited from, the addictive properties of its drugs. Purdue’s marketing campaign sold the idea that dependence on opioids was an acceptable physiological reaction and that overdoses were the result of addicts misusing the drugs. Purdue’s business practices were specifically aimed at expanding the most dangerous and deadly kind of opioid use—the long-term prescription of high dose opioids. Purdue systematically overstated the effectiveness of its drugs for treating pain long-term, understated the risk of addiction, and overstated the effectiveness of risk mitigation strategies that Purdue claimed, without evidence, could render opioid use safe.2 2 See Amended Complaint State of Washington v. Purdue Pharma L.P. (the “Washington Complaint”), at ¶¶ 1.5-1.10 (Dkt No. 79), available at https://www.mass.gov/lists/state-lawsuits-against-purdue-pharma; see also Complaint State of Oregon ex rel. Ellen F. Rosenblum v. Purdue Pharma L.P. (the “Oregon Complaint”), 19-cv-22185 (Cir. Ct., Multnomah Cnty. Sept. 13, 2018), available at the same URL. 2 19-23649-rdd Doc 3276 Filed 07/19/21 Entered 07/19/21 15:56:26 Main Document Pg 3 of 40 3. The Debtors’ proposed chapter 11 plan grossly perverts public policy. It rewards the Sacklers by allowing them to walk away as billionaires with a legal shield for life. The Bankruptcy Court, which acts as a court of equity, should not endorse or impose so inequitable a result. 4. The Plan places a Bankruptcy Court in the position of second-guessing the elected Attorneys General of sovereign States. It blocks the Attorneys General in their efforts to exercise the States’ police powers to protect their vulnerable populations from the massive ongoing scourge of the opioid epidemic. It blocks the Attorneys General from dealing with those who ran and profited from a company that has pled guilty to three federal felony counts for acts from 2007 to 2017 that occurred while the company was under close Sackler control. 5. It is understandable that well-meaning people want to facilitate a global settlement here. It is also understandable that, inasmuch as the case has been filed as a bankruptcy case, those people would use the tools of the Bankruptcy Code to effect the resolution. But it is unjust and improper that the settlement take place in the context of a bankruptcy case. The case, shaped by the bankruptcy context, has taken on several features that are common in the restructuring of business ventures but inappropriate in the resolution of public health crises: The process has been shielded from public view and scrutiny. The documents and analyses upon which the settlement has been based and justified are subject to protective orders. All that has been released to the public are conclusory summaries. The principal parties making the critical determinations are not public health officials nor elected officials answerable to the public, but rather bankruptcy professionals. 3 19-23649-rdd Doc 3276 Filed 07/19/21 Entered 07/19/21 15:56:26 Main Document Pg 4 of 40 The issues being “resolved” by bankruptcy professionals include Public Nuisance, Consumer Protection, Deceptive Practices and Unfair Trade Practices.3 Dissenting creditors (including sovereign States) are bound by the terms of the plan, and there is no ability to opt out. 6. While the billions of dollars dealt with under the plan create the appearance of being massive and substantial, they are woefully insufficient in the context of the opioid epidemic. The claims of the creditors in this case are, by any measure, in the trillions of dollars.4 The payments to be made by the Sacklers, stretched over a ten year period, are also woefully insufficient in the context of the enormous profits made by the Sacklers from the opioid epidemic, the bulk of which they would be permitted (under the Plan) to retain. The Sacklers should not be handed a federal injunction shielding the lion’s share of their fortune in exchange for payments that would provide less than one tenth of one cent on the dollar to the States and other creditors. 7. This case is a matter of the tail wagging the dog. The Sacklers, who have not filed for bankruptcy themselves, are using the bankruptcy process of their now-expendable company to avoid personal liability on the cheap. Had Purdue Pharma simply reorganized as a business entity, this case would have been a relatively simple one. The structure of a plan could have been essentially the same as the current plan with the Sackler settlement excised. Such a plan would have been unexceptional. As amply demonstrated by the Debtors’ feasibility analysis Purdue Pharma had and has ample resources on its own – without any contribution from the Sacklers – to pay all administrative expenses and provide sufficient funding to the Reorganized Debtors. And 3 See “UCC Cover Letter” included in the Plan solicitation package (the “UCC Letter”), at 22-23, available at https://restructuring.primeclerk.com/purduepharma/Home- DocketInfo?DocAttribute=4384&DocAttrName=SOLICITATIONMATERIALS_Q&MenuID=9493. 4 As discussed below in greater detail, infra at ¶ 57, the total claims asserted against Purdue Pharma, not counting unliquidated claims, are in excess of $41 trillion. 4 19-23649-rdd Doc 3276 Filed 07/19/21 Entered 07/19/21 15:56:26 Main Document Pg 5 of 40 the States have negotiated amongst themselves a framework for allocating opioid payments among them for this case and other opioid cases. 8. In short, the legitimate bankruptcy issues in this case could have been addressed separate and apart from a settlement with the Sacklers. Of course, such a resolution was unappetizing to the Sacklers, who preferred to have all their exposure erased. 9. While many States and other creditors have made the decision to support the settlement and vote for the plan their decision should not be binding on the people of Washington, Oregon or the other Objecting States. If the settlement and plan had an opt-out feature then the elected officials of the States of Washington and Oregon and the other Objecting States, who are answerable to the people, could make such a determination on their own. 10. In addition, the settlement of Sackler liability is not a good one and should not be approved. Most of the key elements of the compromise have been hidden from public view, visible only to professionals bound by confidentiality orders, such that the public cannot have confidence in the result. Furthermore, under Motorola Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452 (2d Cir. 2007), the settlement should be rejected because it offends other provisions of the Bankruptcy Code and state law. 11. The Plan must also be rejected because it contains an improper classification scheme. It places together the unlike claims of the States and their subdivisions in a way that violates State sovereignty. And it treats like claims differently by leaving the United States with police powers that have been stripped from the States.
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